Erdene’s Zuun Mod molybdenum-copper project needs US$687 million in initial capital, study finds

Erdene Resource Development, which is listed on the Toronto and Mongolian stock exchanges, on October 14 released the results of a preliminary economic assessment (PEA) for its Zuun Mod molybdenum-copper project in southwest Mongolia. The NI 43-101 study was prepared by a consortium of international and Mongolian firms led by O2 Mining Limited.

Key figures

The company estimates initial capital costs of US$686.8 million, including a US$176.7 million contingency. The PEA outlines an open-pit mine feeding a concentrator that would process 25 million tonnes of material a year.

• Mine life: 34 years
• Average annual production: 19.8 million pounds of molybdenum and 27.9 million pounds of copper
• Total recovered metal: 672 million pounds (305,000 tonnes) of molybdenum and 947 million pounds (430,000 tonnes) of copper
• After-tax net present value (8% discount rate): US$745 million, with an internal rate of return of 16.1%
• At spot prices: NPV of about US$2.0 billion and IRR of 27.8%
• Total taxes and royalties over the mine life: about US$3.7 billion

The base case assumes long-term prices of US$25 per pound for molybdenum and US$5 per pound for copper.

Location and next steps

The project lies about 950 km southwest of Ulaanbaatar, 280 km from the railhead at Ceke on the Mongolia-China border and 35 km from Erdene’s Bayan Khundii gold mine. “This PEA confirms Zuun Mod as one of the world’s premier undeveloped resources of molybdenum,” said Peter Akerley, Erdene’s president and CEO. The company plans to begin drilling in late October to upgrade and expand the resource, and is in talks with potential partners on taking the project into development.

The company cautions that the PEA is preliminary and includes inferred resources that are too speculative to be classified as reserves, so there is no certainty the results will be realised.